Soon, the community will invent products and big companies will scale them up to mass markets. Wired editor-in-chief Chris Anderson explains.

Question: What advice do you give businesses who want to test these waters, but not risk driving off the cliff?

Chris Anderson: There are a lot of businesses that are scaled for a million unit or more in markets and if they release a product that sells in the 10,000 units and they pushed it out in their supply chain, that's really costly. I'm not sure that, Intel for example, always looks for billion dollar markets. If I offer Intel a million dollar market, that's huge for me, but it does not move the needle for them. I understand that and I'm not suggesting they should build a factory only to discover that's only a million dollar market, but what I am thinking is that the R&D cost, the product development cost -- the reality is all of us who do product development are guessing. You can focus group and you can whiteboard and you can think all you want, but we're fundamentally guessing and until the product gets in the marketplace we can't know.

Let me tell you a little story, if you'll indulge me. There was a movie a couple years ago called Flash of Genius about a guy who invented the intermittent windshield wiper in this garage, as one does. He then goes to the big car companies and says, "Are you interested?" And they said, "Maybe, yeah." And he said, "Okay. I want to make it and sell it to you." And they're like, "Dude, you don't have a company or a factory." But he says, "I want to do it." So he has to build a factory, build the production lines and hire work force and by the time he's halfway through, they steal his idea and he's driven out of business and insane. The story then gets very dramatic and that's how it comes into a movie. But you look at the same thing today and you say, "What would that inventor do today?" That inventor would come up with the idea, he would then push a couple buttons and then some factories in China that already exist would start making this. And he could say, "Do you want this?" And the company would say, "Yes." He says, "I can sell to you right now. How many do you need?" And they [say], "Well, we're start with 1,000 and we'll scale up," and it would all work brilliantly. And he wouldn't be driven out of business.

That model distributed innovation. Letting the community sort of invent products, try them out at small scale, figure out the bugs, whether there is real demand, and then use the big company's power to scale them up to mass markets. That feels about right. I talk a lot about Lego; that's a company -- I'm on one of their Advisory Boards and Lego has been very good at tapping their sort of passionate enthusiast community to develop products and then use that experience to help create official Lego products, to help create evangelism for official Lego products and to ensure that an official Lego products are better at no cost to Lego.

I mean, there clearly are limits, but we've just scratched the surface. Right now we're in an era in America where a couple things are clear. First of all, we need to create jobs. Second of all, Detroit's model is in decline. So here's a test. This is the way I think about something: if this is real, if this is big, if this is sort of a real game-changer, then it should work not just on the Internet, but in Detroit. Can you rebuild the car industry along these lines? Obviously the answer is not clear yet, but it's been interesting to watch the experiments. On some level, you've got the Silicon Valley entrepreneurial model with Tesla and Fisker, etc., but you're now starting to see really long tail -- a company called Local Motors out of Boston, which is exactly this model. They're creating units of one, two, etc. You build your own car but they make it so easy for you that you don't need a welding torch or anything much more than a wrench. They Open Source the platform so you can get a car, you can build a car -- it's easy -- you can maintain the car. You can say here’s a feature I’d like this car to have. You can develop it. They’ll find ways to produce it for you to sell to other people who have these cars. Again, it’s not going to replace Detroit but it’s interesting to see that there does seem to have some application model even to the most traditional big manufacturing industries as cars.

Recorded on September 30, 2009